Non-performing Loans Research Articles

Relationship between Financial Risk Exposure and Non-Performing Loans of Commercial Banks in Kenya

Currently, there is a financial crisis affecting commercial banks in Kenya occasioned by high levels of loan loss provision as a result of Non-Performing Loans. The past decade has seen the collapse of major banks like Chase Bank among others. This trend on Non-Performing Loans of the institutions requires urgent measures to reverse failure to which the entire sector is likely to collapse, and customers would lose a significant amount of their deposits. This study sought to investigate the effect of credit risk and liquidity risk on non-performing loans (NPLs) of commercial banks in Kenya and appraise the moderating effect of firm age on the relationship between financial risk exposure on non-performing loans of commercial banks in Kenya. The study was underpinned by liquidity preference theory. The examination adopted a positivist paradigm guided by explanatory research design. The study targeted 40 commercial banks as the unit of analysis while branch managers, operations and risk managers were the units of observation drawn from the banks adding to 120 respondents and census was used. The study collected both primary data using structured questionnaire on the independent variable and secondary data from publications by Central Bank of Kenya (CBK) and respective banks and the same was analyzed through the statistical package for social sciences (SPSS) version 26 in a descriptive and inferential manner. The study established that credit risk (p<0.05) and liquidity risk (p<0.05) were all found to have significant effect on NPLs of commercial banks in Kenya and significantly moderated by their sizes. It was concluded that financial risk exposure has significant effect on NPLs of commercial banks in Kenya. It was recommended that finance manages working in commercial banks in Kenya to balance the investment in short term and long-term assets to maintain operational liquidity levels for better management of liquidity risks. Credit managers working for commercial banks in Kenya need to review the existing credit risk management efforts and mechanisms to minimize exposure to NPLs.

The Impact of Risk Management on Banks’ Profitability: A South African Perspective

Global research has shown that different risk management practices in banks and companies, in general, may significantly influence their profitability. This research paper investigates the impact of credit risk, liquidity risk and market risk in the banking sector in South Africa. It adds to the literature by improving the existing models and by exploring the impact of the coronavirus on the profitability of the same banks through the lens of risk management. The research used quantitative data collected from the six largest commercial banks in South Africa during the period (2013-2020),before Covid-19. Several panel regression models were developed to incorporate credit, liquidity, and market risks. The results showed that the primary determinant of bank profitability was the management of non-performing loans, implying that other financial risks may already be appropriately managed or diversified away in the South African context. However, banks and regulators should place more importance on evaluating the creditworthiness of their current and prospective customers.

THE IMPACT OF THE COVID-19 PANDEMIC AND ECONOMIC CRISIS ON THE PERFORMANCE OF LICENSED COMMERCIAL BANKS IN SRI LANKA

Sri Lanka faced an array of incidents starting from the Easter Sunday attack in 2019 to COVID-19 pandemic and the Economic Crisis which caused disastrous effects on the economy. Despite the policy measure taken, the banking sector was severely affected by soaring Non-Performing Loans (NPLs) levels and dwindling profits. Therefore, the main objective of this study is to evaluate the impact created by the series of adverse economic and social issues from 2019 on the performance of the banking sector in terms of profitability and NPLs using a sample of 12 licensed commercial banks. The data were collected from secondary sources such as annual reports issued by the banks and the Central Bank for the period 2013-2022. The impact of the Easter attack, Pandemic, and Economic Crisis are referred to using a dummy variable, inflation, Gross Domestic Product (GDP) growth rate, and interest rate are used to measure the impact of the macroeconomic environment on the banking sector performance and capital adequacy ratio was used as a control variable. Return on Equity, Return on Assets, and NPLs were used to measure the bank's performance. The results of the random effects panel regression models suggest that there is a significant impact of the Pandemic, Economic Crisis, and GDP growth rate on the performance of the banking sector. This research indicates that a country like Sri Lanka needs to take aggressive policy measures to face these adverse situations. It is required to take credit risk mitigation measures and provide quality loans to curtail the adverse impact caused by the NPLs.

THE INTERPLAY BETWEEN CREDIT RISK AND FINANCIAL PERFORMANCE OF LICENSED SPECIALIZED BANKS: EVIDENCE FROM A DEVELOPING COUNTRY

This paper investigates the influence of credit risk on the financial performance of licensed specialized banks in Sri Lanka from 2006 to 2020, a period marked by economic volatility that added layers of complexity and risk, especially for banks engaged in development lending. Using secondary data from annual reports, the study employs regression analysis to examine this relationship, with the non-performing loan (NPL) ratio as the dependent variable representing credit risk and return on equity (ROE) and return on assets (ROA) as independent variables indicating financial performance. The findings reveal that credit risk significantly impacts the financial performance of these banks, demonstrating a notable negative relationship between ROE and the NPL ratio, as credit risk increases, profitability decreases. These insights are crucial for policymakers to set realistic performance targets and for bank management to allocate capital efficiently and develop strategies to mitigate risk, thereby enhancing financial stability and performance amidst economic uncertainties.

The Influence of Macroeconomic Variables on Non-Performing Loan (NPL) at PT Bank Mandiri (Persero) Tbk

In recent years, Bank Mandiri's non-performing loan (NPL) ratio has been on a relatively stable decline until the COVID-19 pandemic in 2020 quarter I put pressure on the Indonesian economy. Since then, Bank Mandiri's NPL ratio has increased significantly due to the global economic recession that also occurred in Indonesia in 2020 quarter III. This study aims to analyse the effect of macroeconomic variables such as gross domestic product, inflation, interest rates, and exchange rates on non-performing loans (NPL) specifically at Bank Mandiri. This study uses secondary data in the form of historical data of related variables and Vector Error Correction Model (VECM) to estimate the dynamics of long-term and short-term relationships between variables. The results of this study indicate that macroeconomic variables such as BIRATE, INF, and LNPDB significantly affect Bank Mandiri's NPLs in the long-run dynamics, while LNKURS is statistically significant in the short-run dynamics. Keywords: Macroeconomic, Non-Peforming Loan, VECM

Determinant Influencing Non-Performing Loans: A Story of Vietnamese Commercial Banks

This study aims to analyze the factors influencing non-performing loans (NPLs) in commercial banks during the period 2016-2022. The study utilized a sample of 16 joint-stock commercial banks in Vietnam. The authors employed three regression models: Pooled OLS, Fixed Effects Model (FEM), and Random Effects Model (REM), ultimately selecting REM as the most appropriate model. The results show that out of 5 variables, GDP and bank size have a negative impact on bad debt ratio. However, credit growth rate, credit loss provision and loan to total assets ratio have the same direction on NLPs.

The Effect of Enterprise Risk Management, Firm Size, Profitability, Leverage, and Managerial Ownership on Firm Value

The phenomenon of a Tobin's q value of less than 1 indicates a decrease in firm value. Knowing the effect of ERM (Enterprise Risk Management), firm size as proxied by ln (total assets), profitability as proxied by return on assets, leverage as proxied by debt to equity ratio, and managerial ownership on firm value by Tobin's q in conventional commercial banks listed on the IDX in 2017-2022 is the aim of the study. Quantitative methods used in this study and data analysis using SPSS 26. The number of samples is 84 data. Firm value impacted simultaneous by ERM, firm size, profitability, leverage, managerial ownership. In the partial test, firm value have no impacted by ERM and managerial ownership, the firm value has a significant negative impacted by firm size, while the firm value show results that have a significant positive impacted by profitability and leverage variables. Other variables can be added in further study such as bank health calculation ratios, including non-performing loans, so that you can get a regression model with high value.

Analysis of The Influence of Company Fundamentals on Stcock Prices During the Transition Period and After the Implementation of the Remote Tranding System on the Stock Excange Indonesia (Study in Banking)

This study aims to determine the effect of ROE (Return on Equity, (PER) Price Earnings Ratio, DER (Debt to Equity Ratio), NPL (Non - Performing Loans), and BOPO (operating costs of operating income) on banking stock prices during the transition period and after the implementation of remote trading system technology on the Indonesian stock exchange and also examines whether there is a difference in the effect of these independent variables on stock prices in the two periods. This research was conducted with quantitative methods and used secondary data. The number of samples in this study was 6 banking companies listed on the Indonesia Stock Exchange from 2006 - 2020, where the transition period was from 2006-2009 and the remote trading period was from 2010-2020. The data were analyzed separately in both periods using multiple linear regression models, a classical assumption test, and also the Chow Test as an additional test using the SPSS 25 tool. The results showed that during the transition period only DER had no significant effect and 4 (four) other independent variables; BOPO, NPL, PER, and ROE have a significant effect on stock prices, while during remote trading the DER and PER variables have no significant effect and 3 (three) other independent variables; BOPO, PER, and NPL have a significant effect. During the transition period, the independent variables simultaneously have the effect of 70.3% on the price, but during the remote trading period, the ability of the five independent variables is only 35.5% in explaining the rise/fall of stock prices. The results of the Chow test show that there are differences in the influence or structural changes in the influence of independent variables on stock prices and the regression coefficients. There are also differences where the independent variables during the transition period are all inelastic (e < 1) and vice versa during remote trading all coefficient values the regression is elastic (e > 1).

Pengaruh BOPO dan NPL terhadap Financial Suistainability pada PT BPR Artha Parama periode 2016-2023

Banking Companies such as PT BPR Artha Parama experienced an increase in NPL ratios after the emergence of the Covid 19 pandemic, although currently the pandemic has passed, Banking Companies are still experiencing difficulties to reduce NPL ratios. NPLs at banks can experience a significant increase because the covid pandemic has resulted in a decrease in income from debtors with businesses in various sectors including tourism, trade, agriculture, fisheries, etc. The debtor must reschedule his credit or restructure so that the credit quality becomes less good. This study aims to determine the Effect of BOPO and Non Performing Loan (NPL) on Financial Sustainability at PT BPR Artha Parama for the 2016-2023 period. This study used a quantitative approach. The study population is PT BPR Artha Parama with an observation period of 2016 to 2023. The sample selection technique uses the purposive sampling method. The data analysis method used is multiple linear regression analysis. The results showed that BOPO had a significant effect on the Financial Sustainability Ratio, while Non-Performing Loans (NPL) did not have a significant effect on the Financial Sustainability Ratio.

The Determinants of Profitability of Western Balkan Countries Commercial Banks: A panel Data Approach

Commercial banks are considered to be important contributors to the country’s financial system and economic development. The aim of this study was to examine the impact of various factors on commercial banks’ profitability. Moreover, the study compares and analyzes the main determinants of the banks’ profitability in Western Balkan (WB) countries. The sample size includes all commercial banks in WB countries, covering the period 2010–2020. The collected data provides information about the two main measurements used to determine a bank’s performance: 1) return on assets (ROA) and 2) return on equity (ROE), which in our study were used as indicators varying from non-performing loans, the number of banks, real gross domestic product growth, the unemployment rate, and consumer price inflation (percent, period average). The estimated regression models with panel data revealed that real GDP growth, the unemployment rate, and inflation are positively correlated and significantly determine the bank’s performance. While two other factors (non-performing loans and the number of banks) were negatively associated with the performance of banks. Since the determining factors of external and internal profitability turn out to be almost the same for all the countries of the Western Balkans, during the observed period of 2010– 2020, the number of cases of non-performing loans was much higher in other countries of the region than in Kosovo. Once again, the banking system in Kosovo, unlike other countries, has scored ROE performance indicators that are almost three times higher than the average of the countries in the region. On the other hand, Kosovo has the highest unemployment rate in the region. While the weakest ROE performance was in Montenegro, which was improving year after year. Our findings have several important implications for policymakers and regulators, especially in Kosovo.

COVID-19 and Non-Performing Loans in Europe

This study investigates the impact of COVID-19 on the non-performing loans (NPLs) in Europe, distinguishing by European subregion, country-level prosperity, NPL type, and NPL economic sector. We utilized panel data analysis covering the period 2015Q1–2021Q4 while controlling for macro, bank-specific, and regulatory indicators. We derived that the COVID-19 deaths and the strictness of lockdown measures positively affected the NPLs, while the economic support policies exerted a negative effect. Profitable, capitalized banks fared better. The strictness of lockdown measures hindered the ability of SMEs to repay their loans, increasing their NPLs. Sectors involving physical work-related activities also experienced an increase in their NPLs. We also deduced that bank securitization and national culture significantly contributed to NPL reduction.

Pengaruh Operating Cost And Operating Income, Non Performing Loan, and Loan To Deposit Ratio Terhadap Nilai Perusahaan Pada Bank Konvensional Bumn Yang Terdaftar Di Bursa Efek Indonesia (BEI) Tahun 2019-2022

This study aims to determine how the independent variables, namely Operating Cost and Operating Income, Non Performing Loan, and Loan to Deposit Ratio, influence the dependent variable, namely Company Value (Price to Book Value) in BUMN Conventional Banks listed on the IDX in 2019-2022. The type of research used is associative with a quantitative approach with a total population of 42 companies. The sampling technique uses purposive sampling so that the number of samples obtained is 4 companies. This study uses panel data regression analysis techniques using the help of Eviews 10 software. Based on the results of the study, it can be concluded that partially operating cost and operating income affect company value (Price to Book Value), while non-performing loans and loan to deposit ratios do not affect company value. Simultaneously operating cost and operating income, non-performing loans and loan to deposit ratios have a significant effect on company value (Price to Book Value).

Perbedaan Kinerja Bank Perekonomian Rakyat (BPR) Berdasar Kondisi Sebelum, Saat Pandemi dan Awal Transisi Pandemi

During the Covid-19 pandemic, many economic sectors experienced significant disruption. This also has an impact on the banking sector, including BPR which are financial institutions that play a key role in supporting economic growth at the local level by providing banking services to the MSME sector. This research aims to examine whether Covid-19 has an impact on the banking financial performance of the People's Economic Bank by comparing the performance of BPRs before, during and after the pandemic. The data used is secondary originating from 2018-2021 publications. There are several financial performance ratios used, including Liquidity (Loan Deposit Ratio), Non-Performing Loans, Profitability (Return On Assets), Capital (Capital Adequency Ratio) and operations (Operating Costs and Operating Income). The data was processed using a Mann-Whitney U test using the SPSS 23 application. This research indicate that the performance of BPR banks in the NTB region is able to maintain stability and consistent financial performance in several indicators, such as NPL, ROA, LDR, BOPO and CAR before, during and early in the transition to the Covid-19 pandemic.

THE IMPACT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATIONAL EFFICIENCY RATIO ON RETURN ON ASSET

Banking plays an important role in managing the wheels of economic transactions in a country's society. Therefore, as a financial institution that has an intermediary function, banks must demonstrate good financial performance through their financial ratios. The purpose of this study was to determine the effect of the ratio of Non Performing Loans, Loan to Deposit Ratios, and Operational Efficiency Ratio on Return on Assets in Kompas100 indexed banking in 2018-2020. There are eight research samples that meet the criteria in the purposive sampling method with data analysis using multiple linear regression. The findings of this study are Non Performing Loans and Loan to Deposit Ratio have a positive but not significant effect on Return on Assets, while Operational Efficiency Ratio have a negative and significant effect on Return on Assets. Simultaneously, NonPerforming Loans, Loan to Deposit Ratios, and Operational Efficiency Ratio have a significant effect on Return on Assets.

The Effect of Operating Expenses on Operating Income, Loan-To-Deposit Ratio, and Return on Assets on Non-Performing Loans at Rural Banks with Inflation as an Intervening Variable. (Study on Rural Banks Registered in OJK for the Period 2018-2022)

The Effect of Operating Expenses on Operating Income, Loan-To-Deposit Ratio, and Return on Assets on Non-Performing Loans at Rural Banks with Inflation as an Intervening Variable. (Study on Rural Banks Registered in OJK for the Period 2018-2022)

Bank ownership around the world

This paper describes a dataset on bank ownership that covers more than 6,500 banks in 181 countries. It documents that until 2010, there was a reduction in state-ownership of banks and an increase in foreign ownership. However, the Global Financial Crisis interrupted or reversed these trends. I show that at the country level, there is no robust relationship between bank ownership and each of GDP growth and financial depth. Bank-level regressions show that state-owned banks are less profitable and have a higher share of non-performing loans than their private (domestic or foreign) counterparts. There is also evidence that state-owned banks stabilize credit in the presence of domestic shocks (more so in the presence of positive shocks). Instead, foreign banks amplify external shocks. In terms of domestic shocks, foreign banks are not significantly different from their domestic private counterparts.

The Effect of Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR) and Non-Performing Loan (NPL) Against Return on Asset (ROA) With Net Interest Margin (NIM) as an Intervening Variable in BUMN Bank Listed on the Indonesia Stock Exchange 2018-2022

This study aims to determine the effect of Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR) and Non- Performing Loan (NPL) in the Return on Asset (ROA) with Net Interest Margin (NIM) as an Intervening Variable in BUMN Bank Listed on the Indonesia Stock Exchange 2018-2022. The independent variable used in this study is Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR) and Non-Performing Loan (NPL). The dependent variable used is Return On Asset (ROA). The intervening variable used is Net Interest Margin (NIM). The method used in this study uses nonprobability sampling technique, using secondary and quantitative data. The analysis technique in this research uses Smart PLS 3.0 by analysing the inner model such as the coefficient of determination, hypothesis testing and path analysing. The research show that, CAR has a significant and positive effect on NIM, LDR and NPL have no significant and unidirectional effect on NIM, CAR and LDR have no significant and unidirectional effect on ROA, NPL and NIM have a significant and unidirectional effect on ROA, NIM can mediate the influence of the variable CAR on ROA, NIM cannot mediate the influence of the LDR and NPL variables on ROA.

Settlement of Bad Loans with Guarantee of Dependent Rights at Banks and Auction Houses Based on the Law on Dependent Rights No.4 of 1996 (Case Study: Decision No.550/Pdt/2019/PT MDN)

The interaction between economic development and the banking sector, particularly in the provision of credit, is crucial, with the resolution of non-performing loans (NPLs) being a significant issue. This study, titled "Resolution of Non-Performing Loans with Collateral Rights in Banks and Auction Houses," aims to investigate the mechanisms for resolving NPLs through the execution of collateral rights as stipulated by Law No. 4 of 1996. Utilizing Verdict No. 550/Pdt/2019/PT MDN as a case study, the research employs normative and legal analysis methods to explore the implementation of collateral rights in the auctioning of collateral assets when debtors default on their loans. The findings reveal the legal procedures and effectiveness of collateral execution in mitigating NPLs. The study concludes that the proper application of collateral rights laws can significantly aid in resolving NPLs, with implications for improving banking sector stability and credit recovery processes.

THE ANALYSIS FACTORS OF CAPITAL ADEQUACY ON INDONESIA “BUKU-4” BANK CATEGORY

In this paper, the researcher contribute to extending the prior literature on the bank BUKU Category by investigating the influence of capital adequacy ratio factors. On the previous studies, the factors of banking capital adequacy ratio can be influenced by several factors such as Non-Performing Loans (NPL), Loan to Deposit Ratio (LDR), Return on Assets (ROA), and Size. In previous research stated that NPL and LDR as partially had a negative effect on the Capital Adequacy Ratio, ROA and Size had a positive effect on the Capital Adequacy Ratio level. In this study, the researchers used seven sample of commercial banks included in the Bank BUKU-4 Category as commercial banks with huge capital category in the 2018-2022 period. As Random Effect Model (REM) chosen to be the estimation model. Our findings provide empirical support on the findings researh of Azizah and Taswan's research, that simultaneously the NPL, LDR, ROA and SIZE have an influence on the capital adequacy ratio level of Commercial Banks which are included in the BUKU-4 bank category. However, partially, the influence of the independent variables on the dependent variable is differences. NPL has an influence on CAR, LDR has a negative influence on CAR, ROA has a positive influence on CAR, and Size has a negative influence on CAR. The implication of this research is that when commercial banks included on the BUKU-4 Bank category, the commercial banks that included on BUKU-4 Bank category are banks that are considered stable with a capital capacity of more than 70 trillion rupiah so that the NPL, LDR and Size levels have no larger effect. Because the huge of commercial banks which is included are whose financial levels are stable so that not has a big impact on the level of capital adequacy in BUKU-4 category commercial banks, the level of profit obtained by these banks. However, it does not rule out the possibility that apart from the variables that have been studied, there are other variables that can have a big influence on the level of capital adequacy other than those mentioned by the researchers in this study

Peran Agency Theory Terkait Manajemen Risiko Kredit dalam Upaya Meminimalisir Kredit Bermasalah pada KSP Kopdit Obor Mas Kanca Pasar Alok

The aim of this research is to determine and analyze the role of agency theory related to credit risk management in efforts minimize problem loans at KSP Kopdit Obor Mas Kanca Pasar Alok. Research data was obtained through direct interviews with Pasar Alok branch managers, observation and documentation. This type of research is descriptive qualitative. The research results show that the analysis of the development of non-performing loans at the Kopdit Obor Mas Kanca Pasar Alok Savings and Loans Cooperative can generally be said to be tending to decline. The increase in non-performing loans from 2019 – 2023. This is caused by an unstable economic situation which ultimately causes people and companies' income to decrease so that customers are in arrears and is also a result of bad character until the time that has been discovered. Keywords: Agency Theory, Cooperatives, Risk Management, Non-Performing Loans